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CIRCULAR No

CIRCULAR No. 82/1998/TT-BTC OF JUNE 19, 1998 GUIDING THE FINANCIAL REGIMES APPLICABLE TO INDUSTRIAL PARKS, EXPORT PROCESSING ZONES AN HIGH-TECH PARKS

Pursuant to Decree No. 36-CP of April 24, 1997 of the Government promulgating the Regulation on Industrial Parks, Export Processing Zones and High-Tech Parks;

Pursuant to Decree No. 7/1998/ND-CP of January 15, 1998 of the Government detailing the implementation of the Law on Domestic Investment Promotion;

Pursuant to Decree No. 10/1998/ND-CP of January 23, 1998 of the Government on a number of measures to promote and guarantee foreign direct investment activities in Vietnam;

The Ministry of Finance hereby provides the following detailed guidances on financial regimes:

I. SCOPE AND OBJECTS OF APPLICATION

This Circular shall apply to:

- Infrastructure construction and business companies (hereafter referred to as infrastructure development companies for short) which are allowed to be set up and operate in industrial parks, export processing zones and high-tech parks (hereafter referred to as IPs for short).

- Enterprises which are allowed to be set up and operate in industrial parks, export processing zones and high-tech parks (hereafter referred to as IP enterprises for short).

- The management boards of industrial parks, export processing zones and high-tech parks in the provinces and cities directly under the Central Government or in the inter-provincial/municipal territory subject to the central management (hereafter referred to as provincial-level IP management boards).

II. FINANCIAL REGIME APPLICABLE TO IP ENTERPRISES

1. IP enterprises shall have to fulfill their financial obligations towards the State and fully comply with the accounting and auditing regimes in accordance with the State's current regulations.

2. Tax provisions:

2.1. IP enterprises of different domestic economic sectors, when investing in IPs, shall perform their tax obligations at the preferential levels prescribed in the current legal documents on taxes and domestic investment promotion.

2.2. Foreign-invested IP enterprises and foreign parties to business cooperation contracts, that are operating under the Law on Foreign Investment in Vietnam shall perform their tax obligations as follows:

a/ For high-tech industry enterprises and high-tech service enterprises in high-tech parks:

+ To pay profit tax on their gained profits at the tax rate of 10%;

+ To be entitled to profit tax exemption for 8 years from the time their business starts generating profits.

b/ For export processing enterprises:

* Production enterprises:

+ To pay profit tax on their gained profits at the tax rate of 10%;

+ To be entitled to profit tax exemption for 4 years from the time their business starts generating profits.

* Service enterprises:

+ To pay profit tax on their gained profits at the tax rate of 15%;

+ To be entitled to profit tax exemption for 2 years from the time their business starts generating profits.

c/ For IP enterprises:

* Enterprises exporting less than 50% of their products:

+ To pay profit tax on their gained profits at the tax rate of 15%;

+ To be entitled to profit tax exemption for 2 years from the time their business starts generating profits.

* Enterprises exporting 50% to 80% of their products:

+ To pay profit tax on their gained profits at the tax rate of 15%;

+ To be entitled to profit tax exemption for 2 years from the time their business starts generating profits;

+ To be entitled to 50% reduction of the payable profit tax amount for two subsequent years.

* Enterprises exporting more than 80% of their products:

+ To pay profit tax on their gained profits at the tax rate of 10%;

+ To be entitled to profit tax exemption for 2 years from the time their business starts generating profits;

+ To be entitled to 50% reduction of the payable profit tax amount for two subsequent years.

- In the course of its operation, if an enterprise fulfills its product-exporting percentages already registered in the investment license, the above-said tax rates shall be applied throughout the process of operation of the project.

- In cases where the enterprise actually fails to achieve or surpass the product-exporting percentages already registered in the investment license, the directly managing tax agency shall have to base itself on the actual product-exporting percentages of the enterprise to determine the tax rates corresponding to the export percentages prescribed above.

- In cases where the product-exporting percentage is zero (= 0), the profit tax rate set for enterprises of the same business lines which do not register the export of their products shall apply.

- In cases where the investment license does not prescribe the product-exporting percentages but products have been exported in every business year, the above-stipulated profit tax rates, profit tax exemption and/or reduction shall apply.

* Service enterprises:

+ To pay profit tax on their gained profits at the tax rate of 20%;

+ To enjoy profit tax exemption for one year from the time their business starts generating profits.

d/ The investment licensing agency shall base itself on the above regulations and the to be-licensed projects to determine appropriate tax rates as well as tax exemption and/or reduction regimes to be stated in investment licenses.

- The annual taxable profits shall be determined according to the current regulations on profit tax.

- The readjustment of tax rates, tax exemption and/or reduction regimes stated in the investment licenses as well as the reimbursement of profit tax on the profits used for the re-investment shall comply with the current tax regulations.

e/ When transferring their profits abroad, IP enterprises shall have to pay tax on the transfer of profits abroad at the tax rate of 5% of the transferred profit amounts (including the sum of money left outside the Vietnamese territory).

f/ Other kinds of taxes, charges and fees shall be paid in accordance with the current regulations on taxes, charges and fees.

III. FINANCIAL REGIME APPLICABLE TO INFRASTRUCTURE DEVELOPMENT COMPANIES

1. The sub-lease rent rates and charges for land with infrastructure built thereon and of other public utility works in the IPs shall be determined as follows:

a/ Under Clause e, Article 14 of the Regulation issued together with Decree No. 36-CP, when sub-leasing land with infrastructure built thereon or leasing public utility works, the infrastructure development companies shall have the right to set rents and charges according to the following principles:

- The infrastructure development companies shall base themselves on the estimated costs or actual costs of infrastructure constructions and/or public utility works in the IPs; as well as on the investment mobilization need and the requirement for investment capital reimbursement to determine concrete rent and charge rates.

- If the infrastructure maintenance charges are collected separately (the infrastructure maintenance charges are not included in the sub-lease rents of land with infrastructure built thereon), the infrastructure development companies shall have to project different rates of infrastructure maintenance charges to be collected from IP enterprises at the time when they determine the sub-lease rents for land with infrastructure already built thereon.

- The rent and charge rates set by the infrastructure development companies must be reasonable and suitable to the investment mobilization need and must not cause any unequal competition with the attraction of investment in other industrial parks in the same region.

b/ Before announcing the sub-lease rent and/or charge rates for land with infrastructure thereon as well as charges for the use of public utility works, an infrastructure development company shall have to send a written estimate of such rent and/or charge rates (including infrastructure maintenance charges) to the provincial-level industrial park management board for consideration and consent.

The provincial-level industrial park management board shall, within 20 days after receiving the complete dossier, have to consider and give its opinions on the rent and/or charge rates submitted by the infrastructure development company. If deeming that such rent and/or charge rates are not suited to the investment mobilization and attraction (they are higher than the rent and/or charge rates in other industrial parks of the same category), the provincial-level industrial park management board shall have the right to request the infrastructure development company to reconsider and readjust such rent and/or charge rates to appropriate levels.

- If the infrastructure development company and the provincial-level industrial park management board does not agree on the above-said rent and/or charge rates, they shall have to report them to the Ministry of Finance for consideration and decision.

c/ In the course of its operation, the infrastructure development company can increase or reduce the rent and/or charge rates in compatibility to the trend of mobilizing investment in industrial parks. Such increase or reduction of rent and/or charge rates must be agreed upon by the provincial-level industrial park management board. If deeming that such rent and/or charge increase or reduction is not in compatibility to the trend of mobilizing investment in industrial parks, causes unhealthy land rent competition among industrial parks in the region or infringes upon the interests of the State of Vietnam, the provincial-level industrial park management board shall have to request the infrastructure development company to readjust the rents and/or charges; if no agreement is reached, it must be reported to the Ministry of Finance for consideration and decision.

d/ In cases where the infrastructure development company collects in lump-sum the rent of the sub-lease of land with infrastructure built thereon, the charges for the use of public utility works and service charges for the whole operation duration of an IP enterprise: if the operation duration of the IP enterprise is longer than the operation duration of the infrastructure development company, the latter shall have to remit to the State budget the entire collected sum of money, corresponding to the difference between its operation duration and that of the IP enterprise under the guidances of the provincial/municipal finance-pricing services, the taxation department and the provincial-level IP management board.

e/ According to Clause 2, Article 18 of Decree No.10/1998/ND-CP of January 23, 1998 of the Government, the infrastructure development company is allowed to sublease part or the whole of unleased land area to domestic and foreign enterprises with financial capability and experiences in calling for investment capital so that the latter may sub-lease such land with infrastructure thereon to the IP enterprises.

The rent rates of land sublease between the infrastructure development company and the enterprise with financial capability and experiences in calling for investment capital as well as between this enterprise and the IP enterprises shall be mutually agreed upon in the land-lease contracts.

The tax authority shall base itself on the agreements in the land-lease contracts signed between the enterprise with financial capability and experiences in calling for investment capital and the IP enterprises to determine tax obligations for such enterprises.

2. Provisions on the land rents:

2.1. The infrastructure development company shall remit the land rents (if any) to the State in accordance with the State's current regulations:

- Foreign-invested infrastructure development companies shall remit the land rents to the State according to the rates prescribed in their investment licenses and in accordance with the Finance Minister's regulations on land, water surface and sea surface rents applicable to different forms of foreign investment in Vietnam.

- The domestic infrastructure development companies of different economic sectors shall remit land rents (if any) at the rates decided by the Prime Minister or the rates set by the People's Committees of the provinces or cities directly under the Central Government in accordance with the Finance Minister's regulations on land, water surface and sea surface rents applicable to different forms of domestic investment.

2.2. After getting the investment approval or the license for investment in the construction and commercial operation of infrastructure in an IP from competent State agency(ies), the infrastructure development company being a domestic enterprise of any economic sector may compile a dossier requesting the People's Committee of the locality where the provincial-level industrial park management board is headquartered to permit it to defer the payment of land rents by acknowledging a debt to the State budget.

- The dossier requesting the delay of land-rent payment shall include:

+ An application for the delay of land-rent payment, clearly stating the delay duration, the sum of deferred payment and the plan on the use of this sum so that the domestic enterprises of all economic sectors in the IP may defer the payment of the rents for land with infrastructure built thereon...;

+ A copy of the investment license or decision of the competent agency allowing the investment in doing business with infrastructure in industrial parks;

+ A report on financial situation: the company's financial capability, the plan on capital mobilization for infrastructure construction...;

+ The ratified feasibility plan on the IP infrastructure construction, clearly stating the tempo and duration of the IP infrastructure construction;

+ Other documents (if any).

- The provincial People's Committee shall, after considering the dossier, decide whether to allow the infrastructure development company to delay the payment of land rents and approve the company's plan on allowing domestic enterprises in the IPs to delay the payment of sub-lease rents for land with infrastructure built thereon by acknowledging debts between the infrastructure development company and the domestic IP enterprises.

- The duration of deferred payment of land rents (determined on the annual basis) by the infrastructure development company shall be decided by the provincial People's Committee but must not exceed the necessary duration determined according to the approved feasibility plan so that the infrastructure development company may complete the construction of the main infrastructure works (to be construed as infrastructure constructions that directly affect operations of IP enterprises) in the IPs.

- The sum of land rents subject to deferred payment by the infrastructure development company shall be acknowledged as a debt to the State budget. Within 15 days after being allowed by the competent State agency to delay the payment of land rents, the infrastructure development company shall have to send to the provincial Finance-Pricing Department a dossier of application for signing a contract on debt acknowledgment, which shall include:

+ A copy of the land-lease decision issued by the competent State agency;

+ A copy of the land-lease contract (if any);

+ A copy of the decision allowing the deferred payment of land rent.

- After considering the dossier, the provincial/municipal Finance-Pricing Department shall sign a contract on acknowledgment of the sum of deferredly paid land rents as a debt with the infrastructure development company. The contract must clearly state the sum acknowledged as debt, the time for paying off the debt, the number of payments each year and the level of each payment, concretely as follows:

+ The sum acknowledged as debt shall be determined by the yearly payable land rents multiplied (x) by the duration (the number of years) for deferred payment of land rents;

+ The time for paying off the debt shall be determined at the request of the infrastructure development company but not longer than the time permitted for the deferred payment of land rents;

+ The number of debt payments every year shall be determined at the request of the infrastructure development company but it must be at least twice a year.

+ The debt payment level for each time shall be determined by the debited sum divided (:) by the total number of debt-paying times.

- The procedures for and place of remittance of the above-said debited sum of land rents as well as the handling of violations related thereto shall comply with the provisions on the remittance of land rents.

- With regard to IPs located on inter-provincial/municipal territory, the People's Committee and Finance-Pricing Department of the province where the provincial-level IP management board's head office is located shall, after consulting the relevant provincial People's Committees and Finance-Pricing Departments, have to abide by the above-said provisions. In cases where no agreement is reached, the Ministry of Finance shall consider and decide.

2.3. Pursuant to Article 27 of Decree No. 7/1998/ND-CP of January 15, 1998 of the Government that details the implementation of the Law on Domestic Investment Promotion, the infrastructure development companies investing in IPs in districts on list B or regions on list C, issued together with Decree No. 7/1998/ND-CP, shall not have to pay the land use levy if they are assigned land by the State; or shall be entitled to the land-rent exemption for the first five years and the 50% land-rent reduction for five subsequent years after signing the land-lease contract, if they are leased land by the State.

2.4. Pursuant to Article 28 of Decree No. 7/1998/ND-CP of January 15, 1998 of the Government that details the implementation of the Law on Domestic Investment Promotion:

- Within five (5) years after signing a land-lease contract, the infrastructure development company shall be entitled to the 50% reduction of the amount of land rents payable to the State.

- This infrastructure development company, when sub-leasing land to IP enterprises which are eligible for investment preferences, as defined in list A issued together with Decree No. 7/1998/ND-CP, shall have to reduce land rents for such IP enterprises, concretely as follows:

+ The amount of land rent reduction for a year shall be equal to (=) 50% of the land rent calculated according to the original leasing price set by the State (excluding the value of infrastructure projects of the infrastructure development company), which the infrastructure development company shall have to pay to the State, calculated on the land area rented by the enterprises in such IP;

+ The land-rent reduction duration shall be five (5) years from the date the infrastructure development company signs a land-lease contract with an IP enterprise.

2.5. In cases where the infrastructure development company has been granted certificate of investment preferences before the date Decree No. 7/1998/ND-CP takes effect (January 31, 1998), the grace period shall be the remaining period after the date Decree No. 7/1998/ND-CP takes effect.

2.6. The provincial-level IP management board shall have to monitor and request the infrastructure development company to abide by the above-said provisions.

3. Provisions on cost-accounting of investment capital for infrastructure construction:

Investment capital for infrastructure construction related to operation of an IP shall, after the completion of the investment project, be accounted as fixed asset of the enterprise in accordance with the provisions of Decision No. 1062-TC/QD/CSTC of November 14, 1996 of the Minister of Finance.

4. Provisions on tax obligation related to the advance collection of the sub-lease rents for land with infrastructure constructions thereon for many years:

- Infrastructure development companies being Vietnamese enterprises of all economic sectors shall fulfill their tax obligations in accordance with the current provisions of the tax legislation and the Law on Domestic Investment Promotion.

- Infrastructure development companies being joint-venture enterprises regulated by the Law on Foreign Investment in Vietnam shall:

+ Pay profit tax on their gained profits at the tax rate of 10%;

+ Be exempt from profit tax for 4 years from the time their business starts generating profits;

+ Enjoy 50% profit tax reduction for 4 subsequent years.

- In cases where the infrastructure development company collects in lump-sum the sub-lease land rents, charges for the use of public utility works and/or service charges for many years, the tax obligation shall be determined as follows:

+ Turnover tax: shall be paid at the time when the turnover for the entire generated turnover amount is generated (including the turnover collected in advance for many years from the sub-lease of land with infrastructure thereon and from the supply of public utility works and services).

+ Profit tax: The infrastructure development company's profit tax obligation shall be determined in accordance with the provisions of Circular No. 74-TC/TCT of October 20, 1997 of the Ministry of Finance (regarding infrastructure development companies operating under the Law on Foreign Investment), and Circular No. 48/1998/TC-BTC of April 11, 1998 of the Ministry of Finance (regarding domestic infrastructure development companies).

If an infrastructure development company which pays profit tax according to the provisions of Circular No. 74-TC/TCT or Circular No. 48/1998/TC-BTC meets with difficulties in term of investment capital for infrastructure construction, it may submit the written request for the Ministry of Finance's permission to pay profit tax on the yearly basis, which corresponds to the actual turnover of that year (without calculating and collecting in advance the profit tax on the revenue also collected in advance).

- The infrastructure maintenance charges collected from IP enterprises shall also be considered business turnover for determination of turnover and profit taxes.

- The sum of money which is collected by the infrastructure development company from IP enterprises and remitted into the budget according to the provisions of Point d, Item 1, Section III above shall not be accounted into the advance turnover, taxable turnover or turnover subject to profit tax.

IV. FINANCIAL REGIME APPLICABLE TO PROVINCIAL-LEVEL IP MANAGEMENT BOARD

1. The provincial-level IP management board is a unit in charge of making State budget estimate, and all funds for its operation and all its prescribed revenues must be remitted into the budget according to the current assignment of budget management.

2. The provincial-level IP management board is allowed to collect charges and fees corresponding to its tasks entrusted by the State management agencies in accordance with the current regulations. When authorized by a competent State agency to perform the latter's tasks towards IP enterprises or operations of the IP, the provincial-level IP management board shall have to notify this to and register with the Taxation Department of the province where its head office is located so as to fill procedures for the remittance of charge and fee amounts collected from the implementation of the entrusted tasks.

- In addition to charges and fees collected from its entrusted tasks, the provincial-level IP management board shall be allowed to collect other charges and fees as prescribed in Appendix I issued together with this Circular. The provincial-level IP management board shall have to register and work with the provincial Taxation Department for the completion of procedures on the collection and remittance of the charge and fee amounts.

- The provincial-level IP management board shall have to make public all charge and fee levels; and post up lists of charge and fee levels at its head office as well as at its representative office (if any) in each industrial park.

- The provincial-level IP management board shall have to use vouchers on the collection and remittance of charges and fees, issued by the Ministry of Finance (the General Department of Taxation); have to manage and use such vouchers in accordance with the regulations of the Ministry of Finance. All permits and/or certificates issued by the provincial-level IP management board must be attached with charge and/or fee receipts (except in cases where the related matter is exempt from charges and/or fees).

- Every month, the provincial-level IP management board shall be entitled to temporarily deduct 10% of the total collected charge and fee amount in service of its activities related to charge and fee collection as well as to the mobilization for investment in IPs; and make deductions for the establishment of reward fund and welfare fund, with the deducted amount for each fund not exceeding the value of three-months' salaries of the provincial-level IP management board. The provincial-level IP management board shall have to make estimate and final account settlement of the collected charge and fee amount, the deductions to be included in the annual budget revenue and expenditure estimate, the surplus amount to be remitted into the State budget (excluding the balance of the reward fund and welfare fund).

- By the end of the fifth day of the following month at the latest, the provincial-level IP management board shall have to remit the full amount of collected charges and fees into the State budget (after temporarily deducting 10%). In cases where the charge and fee amount to be remitted into the budget already exceeds 50 million VND, even when the month has not ended yet, the provincial-level IP management board shall have to immediately remit such amount into the budget.

3. The provincial-level IP management board shall have to evaluate and agree on sub-lease rent and charge rates for land with infrastructure built thereon as well as charges for the use of public utility works as provided for in Item 1, Section III above.

- The provincial-level IP management board shall have to determine and inform the provincial Finance Department and Taxation Department of the sum of money already collected by the infrastructure development company in accordance with the provisions of Point d, Item 1, Section III above and request the infrastructure development company to fully and promptly remit such sum into the State budget. This sum shall be accounted into the budget revenue of the province where the provincial-level IP management board is headquartered, and considered a revenue arising outside the annual budget plan of the province.

- When an infrastructure development company terminates its operation according to its license, the People's Committee of the province that is entitled to the above-said revenue shall have to allocate fund for the maintenance and improvement of infrastructure constructions in the IP so as to ensure normal operations of the IP enterprises in the remaining period.

- In cases where an infrastructure development company is allowed to extend its operation duration, the provincial People's Committee shall have to return to the infrastructure development company the earlier collected sum of money (as prescribed in Point d, Item 1, Section III), corresponding to the extended operation duration of the infrastructure development company.

V. ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect from the date of its signing and replaces Circular No. 27-TC/CSTC of May 25, 1996 of the Ministry of Finance; to annul the earlier regulations on financial regime applicable to industrial parks, export-processing zones and high-tech parks which are contrary to the provisions of this Circular.

In addition to the preferences prescribed in this Circular, the infrastructure development companies and IP enterprises shall also be entitled to preferences provided for in other legal documents (if any). In cases where they are entitled to enjoy more than one preferences, the highest level of preference shall apply.

2. IP enterprises, which are licensed to operate before the effective date of the Regulation on Industrial Parks, Export Processing Zones and High-Tech Parks, issued together with Decree No. 36-CP of April 24, 1997 of the Government, if allowed by the competent agency to readjust their investment licenses in order to enjoy investment preferences in accordance with the provisions of Decree No. 36-CP, shall also be entitled to apply the provisions of this Circular.

3. In the course of implementation of the Circular, if any problem arises, it should be reported to the Ministry of Finance for study and settlement.

For the Minister of Finance

Vice Minister

TRAN VAN TA

APPENDIX I

List of charges and fees to be collected by the management boards of export processing zones, industrial parks and high-tech parks

(Issued together with Circular No. 82/1998/TT-BTC of June 19, 1998 of the Ministry of Finance)

Ordinal Kinds of charges Levels of collection Note

number and fees Thousand US

dong dollar

01 Seal making registration 100 10 Each time

02 Registration of accounting regime and

fixed-asset depreciation regime 300 30 Each time

03 Business registration 300 30 Each time

04 Evaluation of designs and issue of

construction permits 0.1% 0.1% Calculated on the estimated

cost of project construction

05 Issue of paper ratifying list of imported

machinery and equipment 0.15% 0.15% Calculated on the value

of the imported goods

06 Pre-acceptance test of operation of a project

(separate items or the whole project) 0.1% 0.1% Calculated on the value

of the project

07 General inspection and issue of permits

for operation 0.1% 0.1% Calculated on the value

of the project

08 Issue of paper ratifying list of imported

materials, auxiliary materials and spare

parts in service of production and business 200 20 Each time

09 Permits for bringing raw materials and

materials into Vietnam for processing 200 20 Each time

10 Permits for bringing machinery or

equipment out of export-processing zone

(enterprise) for repair 100 10 Each time

11 Issue of paper ratifying list of export goods 200 20 Each time

12 Permits for sale and purchase activities

between export processing enterprises

of different zones 200 20 Each time

13 Certificates of transactions guaranteed by

movable and immovable assets 400 40 Each time

14 Certificates of the change and/or

cancellation of transactions guaranteed

by movable and immovable assets 200 20 Each time

15 Certificates of technicians in charge of

electricity and pressure 150 15 Each time

16 Certificates of goods' origin 50 5 Each time

17 Certificates of book examination 200 20 Each time

18 Registration of permanent residence

addresses 120 12 Each time

19 Issue of export processing zone (enterprise) pass:

- For people 20 2 Calculated for each time

- For vehicles 120 12 of issue/year

20 Registration of changes of personnel,

signatures (the managing board, the

directorate, the chief accountant or the

director in charge of finance) 120 12 Each time

21 Evaluation of investment and issue of

investment licenses 0.01% 0.01% Calculated on the total

investment capital but the

level of collection must

not be lower than 50 USD

and exceed 10,000 USD

22 Issue of certificates of construction planning 200 20 Each time